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NJ Superfund Subcontractor Convicted In Bid-Rigging Case

By Jeannie O'Sullivan

Law360, New York (March 16, 2016, 7:38 PM EDT) -- A federal jury on Wednesday found a Superfund site subcontractor guilty of bribing a prime contractor with lavish gifts and more than $1 million in kickbacks to ensure that he would continue to get work on a multiphase project in New Jersey. After nearly a day of deliberations that followed a three-and-a-half-week trial, a jury in Newark federal court convicted John A. Bennett of one count of conspiracy to commit wire fraud and major fraud against the United States and one count of substantive major fraud for his role in the bid-rigging scheme, which prosecutors said netted the contractor $43 million in ill-gotten contracts. "John Bennett corrupted the competitive bidding process by paying kickbacks in order to win a Superfund contract. He literally stole money from the United States, Assistant Attorney General Bill Baer of the Justice Departments Antitrust Division said in a statement after the verdict. Bennett faces up to 15 years in prison and $1.2 million in fines if sentenced to the maximum penalties, according to the assistant attorney general. Sentencing is scheduled for June 27. We are disappointed by the jury's verdict but we are hopeful that the trial court will enter a judgment of acquittal based on the legal insufficiency of the government's case, one of Bennetts attorneys, Robert J. Anello of Morvillo Abramowitz Grand Iason & Anello PC, told Law360 after the verdict. Anello said that he expects Bennett will appeal the verdict if theres no acquittal. An $80,000 Mediterranean cruise, a $4,000 flat-screen television and a pricey wine refrigerator were among the gifts Bennett Environmental Inc. gave to employees of Sevenson Environmental Services Inc. in exchange for information about the bid prices of BEIs competitors for a toxic waste cleanup project, prosecutors said at trial. That information allowed BEI to submit the best price for projects at a Federal Creosote, a U.S. Environmental Protection Agency-designated Superfund site in Manville, New Jersey. The hefty cleanup accounted for 75 percent of BEIs business and catapulted profitability for the company, prosecutors said. To cover the kickback costs, BEI padded the price it charged to the EPA by $13.50 per ton of removed contamination, prosecutors said. Bennetts defense attorney had painted his client as a hardworking family man and entrepreneur who built a pioneering soil contamination treatment and removal company and received the first contract in the three-phase Federal Creosote project "fair and square." But in later phases, Bennett fell prey to a corrupt employee, defense attorneys said; it was an aggressive young BEI salesman, Robert G. Griffiths, not Bennett, who masterminded and carried out the scheme in cahoots with an SES executive. Griffiths, a hot-shot rising star fresh out college, and SES project manager Gordon D. McDonald who were both charged in the scheme forged an arrangement in which BEI wired more than $1 million in kickbacks masked as unreimbursable expenses to McDonald using a shell companys account, according to defense attorneys. Bennett didnt know about the scheme because Griffiths was under the supervision of other BEI employees as the time, including one being groomed as Bennetts successor, and Bennett fired the potential successor once he found out about the lavish gifts, defense attorneys said. Griffiths pled guilty before Judge Susan D. Wigenton and was sentenced in September 2011 to 50-month prison term and $4.6 million in restitution. A jury found that McDonald played a pivotal role in multiple bid-rigging, fraud and kickback schemes with BEI and two other subcontractors at Federal Creosote and Diamond Alkali in Newark, New Jersey. Judge Wigenton imposed a 14-year sentence, the longest ever for an antitrust crime, and $4.36 million in restitution on McDonald in October 2014. The Federal Creosote site comprises a 15-acre commercial development and a 35-acre residential community on a site where a coal tar wood treatment facility operated from 1911 to the mid-1950s, according to the EPA. The cleanup entailed the treatment and removal of 170,000 tons of contamination at a $300 million cost, most of which was absorbed by the EPA because the developer refused to foot the bill, according to an EPA project manager who testified for the prosecution. The scheme has led to guilty pleas or convictions of at least nine people and three companies, and generated $6 million in criminal fines and restitution. Bennett is represented by Richard F. Albert, Robert J. Anello, Jacob W. Mermelstein and Christopher W. Robbins of Morvillo Abramowitz Grand Iason & Anello PC. The government is represented by Helen Christodoulou, Sean Matthew Farrell, Bryan Serino, Daniel Marc Tracer, Mikhail Zucconi Vanyo of the U.S. Department of Justice. The case is U.S. v. McDonald et al., case number 2:09-cr-00656, in the U.S. District Court for the District of New Jersey.

Answer the following questions in paragraph form:

How did the fraud operate?

What measures could have been taken to prevent and detect the fraud?

An accounting information system would have safeguards in place to make sure proper controls were in place to guard against fraud.

Why didn't the accounting information system prevent the fraud?